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Aipedia: Mortgage brokers
A broker is bound by what its recommendation letter says, even if generative AI wrote the first draft. Because the letter is the main evidence of the advice, an inaccurate one can undermine the defence in an Ombudsman complaint or a PI claim.
Part of: AI in Mortgage brokers
In short
Generative AI can turn a fact-find and product choice into a polished recommendation letter in seconds. The risk is a letter that reads well but does not match the advice: wrong reasons, invented borrower priorities, missing risks or a different product. SYSC 9.1.1R requires orderly records and the letter is usually the key record. The Financial Ombudsman Service wants to understand how AI contributed to an outcome. PI policies must cover Ombudsman awards under MIPRU, but a poor letter makes a complaint harder to defend. Adviser review before sending is the core control.
Some CRM and advice platforms now include generative drafting. The adviser selects the product, the tool reads the fact-find, notes and sourcing results, and produces a letter explaining why the mortgage is suitable. Others paste notes into a general-purpose generative AI chatbot. Both approaches save time on a task advisers often find repetitive.
The difficulty is that generative models write fluently whatever their inputs. If notes are incomplete, out of date or contradictory, the tool fills gaps with plausible wording rather than flagging them. It may also mirror phrasing from templates or earlier letters, so different borrowers receive near-identical reasons. A letter that sounds personal can therefore be less personal, and less accurate, than one an adviser wrote quickly by hand.
FS25/6 notes respondents' concern that AI could "hallucinate or produce incomplete data" (paras 4.24 to 4.26), which is the central risk in generated letters.
Illustrative scenario: an adviser discusses a five-year fix with a borrower who plans to move within three years, and they agree a two-year product instead. The adviser updates the product but not the notes. The AI draft picks up the earlier discussion and explains that a five-year fix suits the borrower's wish for long-term certainty. The letter goes out unread. When the borrower later complains about an early repayment charge on an unrelated matter, the letter contradicts both the product and the borrower's account.
Other mismatches include invented reasons ("you told us you value flexibility"), missing explanations of why a cheaper option was rejected, risks that were discussed but not recorded, and wording copied between clients.
The Ombudsman usually decides on what is fair and reasonable, looking at the evidence available. In its response to the Mills Review the service said it wants a clear rationale on how AI contributed to an outcome. A letter that does not match the file suggests the advice process was not under control, even if the advice itself was sound.
A PI policy meeting MIPRU 3.2.4R must cover Ombudsman awards and defence costs. Insurers defend on the evidence, so an inaccurate letter can make a defensible complaint expensive. Where a letter has been sent with errors and a complaint follows, the insurer will want to see the draft history and any correction, so keeping them is part of protecting cover. See what to document about AI use for PI. Ombudsman award limits are explained in the FOS award threshold guide.
Apex arranges PI for mortgage brokers and can explain how your policy handles Ombudsman awards and defence costs. More guides are on the mortgage broker AI hub, including telling borrowers you use AI.
Yes. No FCA rule prohibits it. The broker remains responsible for the content, and the letter should accurately reflect the advice given and the reasons for it. Adviser review before sending is the essential control.
The letter may be treated as evidence of what was advised, which can weaken the broker's position. If an error is spotted, correct it promptly in writing to the borrower and keep a record of the correction.
There is no specific FCA rule requiring this. Some firms mention AI support in their terms of business or privacy notice instead. What matters most is that the adviser has checked the letter and that it accurately records the advice and the reasons for it.
A MIPRU-compliant policy must cover Ombudsman awards. An award arising from negligent advice or documentation is usually treated like any other, subject to the policy terms and excess, regardless of whether AI drafted the letter.
Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.
Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
